Fiat Money
When we first started using money...you know, metal bits or shells or what-have-you as a medium of exchange...we felt more comfortable using it if it was “backed” by a physical good. Rather than just “saying” that this shell is worth $100 of value, it worked better if you could turn in that shell at the bank for $100 of value of something...like gold, or silver, or another commodity.
Fiat money is the new kind of money: money that’s not backed by a tangible commodity. You can’t turn your money in to the bank in exchange for a physical good that’s backing that money. Until the 1970s, even the U.S. dollar was backed by gold, meaning you could redeem USD for gold bars. Oh, the good old days.
When society’s been around and is stable long enough, people trust that a currency is legit. Once it’s legit enough, it doesn’t need to be dependent on an underlying physical commodity…people will still trust and use it, as it turns out.
Today, most currencies are fiat money. Fiat money is supported not by physical goods, but by supply and demand of that currency in the international market. The anti-fiat-money crew will tell you this is bad, because fiat money is more prone to inflation than commodity-backed money.
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Finance: What is a Yankee Bond?36 Views
Finance allah shmoop what is a yankee bond We're safe
We're sound we're saying at least that's how we look
financially when you know the u s has compared with
most of the rest of the world that's why a
bunch of countries issue their own bonds denominated in u
s dollars you know countries like panama el salvador micronesia
and macron asia Well ours is ah hard currency and
that we don't or at least haven't historically created massive
ten percent a month inflation to deflate the value of
our own currency and well that would make it super
easy for our government to pay off its ludicrously high
death but we don't do that We respect the people
who loaned money to us including our own citizens So
we have a hard currency It just kind of stays
where it is Yes there's inflation Yes we raise the
rates a little bit here and there defended but generally
just kind of does its thing So we fight hard
to keep that trust that the rest of the world
often values more than well trust in their own governments
or at least their own government's ability to manage their
currency when they issue say argentinean bonds payable in u
s dollars Well then that's a yankee bond And we 00:01:14.819 --> [endTime] are the banker And well they are the yankee
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